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Government hikes Medicare Advantage pay estimate

Tom Murphy AP Business Writer

Posted:
04/07/2014 04:38:57 PM MDT

The government has raised its payment estimate for Medicare Advantage plans months ahead of a busy election season during which cuts to the program promise to be a key focus for politicians and voters.

The Centers for Medicare and Medicaid Services said Monday that 2015 payments to the plans should increase less than 1 percent overall. That compares to a drop of nearly 2 percent that the government forecast in February.

Analysts expect actual funding to fall when many other variables are considered. But the drop shouldn't be as steep as they initially forecast.

This might lead to fewer changes for the plans, which serve nearly 16 million people, or about 30 percent of all Medicare beneficiaries. The government has squeezed rates for the past few years in part to help fund the health care overhaul. Insurers that run the plans say they've had to trim benefits, drop doctors and leave markets as a result.

"It's a good day for (the) plans," said Matthew Eyles, an analyst at market research firm Avalere Health.

Medicare Advantage plans are privately run versions of the government's Medicare program for the elderly and disabled people. The government subsidizes the coverage, and insurers generally offer dozens of different plans in every market. Many come with extras like dental and vision coverage that are not available with standard Medicare.

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The government has paid insurers who run Medicare Advantage plans more per enrollee than the cost of care for people with traditional Medicare coverage. But that is being scaled back in part to help pay for the overhaul, the massive federal law that aims to provide insurance for millions of uninsured people.

UnitedHealth Group Inc. is the nation's largest provider of the coverage. Its CEO, Stephen Hemsley, told analysts earlier this year that 2014 reimbursement was cut about 6.7 percent, and a similar cut for 2015 would be "extraordinarily disruptive."

The powerful trade group America's Health Insurance Plans launched a multimedia marketing push earlier this year to remind Congress that Medicare Advantage customers are carefully watching changes to the plans. AHIP also won the support of 40 senators from both parties who, in a Feb. 14 letter, called on the Obama administration to essentially hold Medicare Advantage rates steady.

One of the senators who signed that letter, New York Democrat Chuck Schumer, said in a statement Monday that he was glad the Obama administration heeded their call.

"In many parts of the country, including New York, Medicare Advantage works very well," Schumer said.

Analysts have said the government's preliminary forecast from February would translate into actual funding cuts ranging from 3 to 6 percent. Changes in funding can depend on where the plan is located and its quality rating, among other variables.

Now, Medicare Advantage plans may see a drop of only 1 percent to 3 percent, Eyles said.

The government is still scaling back funding for the coverage, but it also made some adjustments to how plans are compensated for the health status of their enrollees, Eyles said after a preliminary analysis of Medicare's latest numbers, which were released after Wall Street closed on Monday.

Medicare said Monday the final rate announcement "sets a stable path" for Medicare Advantage plans.

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